The Haurlan index, which was originated by the Trade Levels, Inc., advisory service, has received comparatively little attention unfortunate, as it has proved to be effective in signaling tops and bottoms. By Paul E. Carroll
The number of advancing and declining stocks each day provides the raw data for a variety of breadth
indicators and trading systems, among which are the advance-decline line, the McClellan oscillator, the
Nicoski index (advancing stocks divided by declining stocks) and the Bolton-Tremblay indicator, to
mention only a few. And then there is the Haurlan index.
I have found the Haurlan index to be quite effective in signaling market tops and bottoms. The index is
essentially an exponential moving average of advancing stocks minus declining stocks. I use New York
Stock Exchange (NYSE) daily breadth data in my calculations. Three variations of the Haurlan index are
short, intermediate and long term. First of all, to seed this, start with today's breadth (that is, the number
of today's advances minus the number of today's declines) and for the next day, take yesterday's breadth
as yesterday's index. Calculate the short-term version by taking yesterday's index and adding to it a
product of a smoothing constant and the difference of today's breadth minus yesterday's index.